🔗 Share this article

Russia's monetary authority has declared it is claiming damages totaling $230 billion from the securities depository Euroclear. This action constitutes a clear response from the Kremlin against proposals to utilize frozen Russian state funds to aid Ukraine.

The Substantial Demand

According to accounts in Russian news outlets, the monetary authority initiated a lawsuit last week for approximately 18 trillion roubles. This sum is equivalent to the aforementioned $230 billion claim.

EU leaders are set to decide later this week regarding a proposal to leverage approximately €210 billion in frozen Russian state funds. The proposal involves providing Ukraine with a large loan to finance its defence and financial needs.

Most of these assets, amounting to €185 billion, reside at the Euroclear clearing house in Brussels. Euroclear serves as the main keeper for the Kremlin's immobilised financial reserves.

Divergent Legal Views

European Union officials have maintained that their plan is on solid legal ground. Their position is based on the fact that ownership of the sovereign wealth remains with Russia, despite being it was frozen in European jurisdictions following the 2022 invasion of Ukraine.

Moscow, in contrast, has labeled any use of the assets as theft. It has threatened retaliatory measures, including seizing EU corporate holdings within Russia.

Kirill Dmitriev, who has taken on a key position in diplomatic talks, stated on a social media platform that Russia "will win in court" and regain its funds. He warned that the EU, the common currency, and Euroclear "will suffer" from the plan.

Geopolitical Maneuvering

In comments interpreted as an attempt to create division between Europe and the United States, the official characterized the proposal as "a severe attack on the right to ownership and the global financial system created by the United States."

The clearing house refused to comment on the latest legal action. It has previously noted it is contending with more than 100 lawsuits in Russian courts.

Legal Hurdles Ahead

Although courts in EU countries are not expected to enforce rulings from Russian courts, experts anticipate Moscow to seek enforcement in countries with closer ties to the Kremlin.

"The Bank of Russia may attempt to implement a Russian legal ruling against Euroclear in countries such as China, Hong Kong, the UAE, Kazakhstan, and other friendly nations, if relevant holdings can be identified," commented a lawyer from an NSP law firm.

EU Countermeasures

European authorities indicated they are developing measures to deter other countries from assisting any Russian legal action against EU companies. They are also crafting safeguards to protect EU member states with assets in Russia from what they call "illegal expropriation."

How the Funding Would Work

According to the complex plan, the EU would issue an initial €90 billion loan to Ukraine, backed by the proceeds generated from the immobilized assets at Euroclear. Critically, Russia's ownership claim on the underlying funds would remain untouched.

Kyiv would solely be required to return the money in the event that Russia agreed to pay compensation for the vast damage caused during the nearly four-year war.

Alternative Proposals

The Belgian government, supported by Italy, Bulgaria, and Malta, has asked the EU to examine an different method for funding Ukraine. This entails joint EU debt issuance to secure a loan, backed by unused funds within the EU budget.

Such a proposal, nevertheless, requires full agreement among all 27 member states. The Hungarian government, considered aligned with the Kremlin, has already expressed its objection.

Commenting on Monday, the EU foreign policy chief, Kaja Kallas, said the reparations loan as "the most credible solution" for supporting Ukraine. "This mechanism is based on the Russian immobilized funds, which means it is not drawn from our public funds, which is also important," she stated. "It also sends a clear message that if you do all this destruction to another country, you have to pay for the reparations."